TOP STORIES -- Nov. 16-21
China Threatens Tariffs on U.S. Products
Fears that the United States is on a collision course with its major trading partners intensified after China threatened to impose tariffs on U.S. goods and abruptly canceled a trip to buy American farm products.
The actions by Beijing followed the Bush administration’s reluctance to lift tariffs on imported steel and its decision last week to restrict imports of Chinese-made bras, nightgowns and knit fabrics. Domestic textile manufacturers claimed that they were being hurt by a surge in those products from China.
The budding trade war with China and the European Union, which has threatened to retaliate unless Washington removes the steel duties, came on a day when U.S. trade officials hailed what they said were promising developments in a plan to create a free-trade zone in another part of the world. Others said there was little progress made during the talks held in Miami with trade ministers from across the Americas.
The meeting, set against a backdrop of sometimes violent protests, was aimed at establishing a Free Trade Area of Americas, a trading bloc that would stretch from Alaska to the tip of South America.
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State Democrats to Push Workers’ Comp Reforms
On the defensive to wring more savings out of the state’s $29-billion workers’ compensation system, California Democrats took up the gauntlet thrown down by Gov. Arnold Schwarzenegger and his Republican allies to move quickly on additional reforms.
Senate Majority Whip Richard Alarcon (D-Sun Valley) said he and colleagues would push several bills that would build on the estimated $5 billion to $6 billion in cuts achieved through legislation passed in September.
Still, Alarcon served notice that Democratic lawmakers wouldn’t be pressured into signing away worker protections to benefit employers and insurers, who have been newly energized by Schwarzenegger’s forceful championing of industry-backed cost cutting.
Schwarzenegger had proposed slashing an additional $11 billion from the cost of addressing work-related injuries.
Though he expressed willingness to cooperate with Republicans, Alarcon said he also was preparing a worst-case strategy with a bill that would abolish California’s workers’ comp system and allow injured workers to sue companies for on-the-job injuries.
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NYSE Members OK Reforms, New Directors
New York Stock Exchange members, in a historic vote precipitated by the flap over their former leader’s outsize pay, approved reforms and elected eight directors without business or regulatory ties to the exchange.
The reforms, subject to approval by the Securities and Exchange Commission, would abolish the 27-member NYSE board long headed by Richard Grasso. He was ousted as chairman and chief executive in September after a public outcry greeted revelations that he had taken a $188-million pay package.
In the aftermath, the board was criticized for conflicts of interest, an atmosphere of “clubbiness” and a tradition of extreme secrecy.
The reforms were meant to address those and other complaints. For example, they would require the NYSE to disclose the salaries of top executives in an annual report.
Among other things, the pay of Big Board officials would be set by the new, independent board, which also would oversee regulation of the NYSE’s troubled stock-trading operations.
The reforms don’t go far enough to suit such critics as the California Public Employees’ Retirement System and state treasurers including California’s Phil Angelides. Some favor having directors nominated and approved by an outside body, such as the SEC. All have called for greater board representation for the investing public.
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Mutual Fund Scandal Spreads to Sales
The Securities and Exchange Commission is looking into whether 14 of the country’s largest mutual fund companies, including two based in Southern California, engaged in improper sales practices, industry and regulatory officials said.
The disclosure came as brokerage giant Morgan Stanley agreed to pay $50 million to settle SEC charges that it had received substantial hidden fees from the 14 companies in return for promoting their funds to investors over those offered by dozens of competitors.
The Southern California firms being looked at by the SEC are Pimco Funds, the Newport Beach-based bond fund giant, and Capital Research & Management Co. of Los Angeles, which runs the American Funds group.
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AMC, Loews Cinema Chains in Merger Talks
AMC Entertainment Inc. and Loews Cineplex Entertainment Corp. said they might combine their businesses, a transaction that would create the nation’s largest movie theater chain.
The firms did not provide details of the talks, cautioning that they were preliminary.
An AMC-Loews marriage would create a company with revenue of $2.6 billion and more than 6,300 screens at 513 theaters. It would surpass Colorado-based Regal Entertainment Group, currently the nation’s largest theater chain.
In Southern California, AMC has 327 screens at 22 theaters. Loews has 77 screens at eight theaters; Regal, 600 screens at more than 60 complexes.
Industry experts speculated that Kansas City, Mo.-based AMC, by far the larger of the two theater operators, would be the controlling partner in any deal with Loews, which is owned by Toronto-based Onex Corp.
An AMC-Loews merger could spark similar deals among the country’s small and mid-size theater chains, analysts said.
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HP Sees Profit Double in Its 4th Quarter
Computer giant Hewlett-Packard Co.’s fiscal fourth-quarter earnings more than doubled as its struggling corporate computing division recorded an operating profit for the first time since HP agreed to buy Compaq Computer Corp. more than two years ago.
The quarter also was the first since the $19-billion deal closed in May 2002 in which all four of the company’s main business units were in the black.
That fulfilled a high-stakes pledge from Chief Executive Carly Fiorina, who had come under fire for losing money in business and personal computing.
The Palo Alto-based company said it earned $862 million, or 28 cents a share, on revenue of $19.9 billion in the three months ended Oct. 31, up from $390 million, or 13 cents, in the same period last year on revenue of $18.1 billion.
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Euro Disney’s Loss Balloons as Visits Dip
Debt-laden Euro Disney reported that its net loss nearly doubled during the last year, reflecting Europe’s tender tourism market along with increased operating costs for the company’s newest theme park.
Euro Disney -- which is 39.1% owned by Burbank-based Walt Disney Co. -- attributed the wider loss to the “prolonged downturn in European travel and tourism, strikes and work stoppages throughout France during the year, combined with challenging general economic conditions.”
More than 12.4 million people visited Disneyland Paris and the Walt Disney Studios Park, the two parks that constitute Euro Disney, in the fiscal year that ended Sept. 30, down from 13.1 million during the previous year. Hotel occupancy rates were 3% lower.
Euro Disney said it suffered a loss of nearly $66 million for the year, up from nearly $39 million for the previous year. Revenue fell by 2.1% to $1.24 billion from a year earlier.
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Markets Suffer Second Straight Week of Losses
The stock market suffered its first back-to-back weekly losses since August as terrorism fears and concerns about global trade wars weighed on investors.
Bombings in Turkey targeting British interests rattled Wall Street, and the mood wasn’t helped by tough talk from the United States and China about possible trade sanctions. The trade spat pushed the dollar to a record low against the euro and a three-year low against the yen.
For the week, the benchmark Standard & Poor’s 500 index and the Dow Jones industrial average both fell 1.4% and the technology-laden Nasdaq composite index lost 1.9%. It was the second straight week of losses for all three indexes.
For a preview of this week’s business news, please see Monday’s Business section.
